Earnings Beat: MSCI Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Simply Wall St
·4-min read

Last week, you might have seen that MSCI Inc. (NYSE:MSCI) released its third-quarter result to the market. The early response was not positive, with shares down 2.7% to US$341 in the past week. It looks like a credible result overall - although revenues of US$425m were what the analysts expected, MSCI surprised by delivering a (statutory) profit of US$2.16 per share, an impressive 26% above what was forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on MSCI after the latest results.

View our latest analysis for MSCI

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Taking into account the latest results, the consensus forecast from MSCI's eleven analysts is for revenues of US$1.86b in 2021, which would reflect a solid 12% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to expand 18% to US$7.98. Before this earnings report, the analysts had been forecasting revenues of US$1.85b and earnings per share (EPS) of US$7.83 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

There were no changes to revenue or earnings estimates or the price target of US$399, suggesting that the company has met expectations in its recent result. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on MSCI, with the most bullish analyst valuing it at US$501 and the most bearish at US$255 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that MSCI's rate of growth is expected to accelerate meaningfully, with the forecast 12% revenue growth noticeably faster than its historical growth of 9.6%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.0% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect MSCI to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple MSCI analysts - going out to 2024, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with MSCI , and understanding them should be part of your investment process.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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